A general factorial decomposition of the second Theil index of inequality with applications in environmental economics.

Abstract

In this paper, we propose a general factorial decomposition of the second Theil index of inequality at economic level. The factorial decomposition of the second Theil index of inequality in k multiplicative factors is shown. Such decomposition is detailed, on the one hand, considering the partial contribution of each factor and, on the other hand, taking into account the interactions between factors as a whole. The previous decomposition is extended to analyze the between- and within-group inequality components. Finally, the study of the terminants of global inequality in percapita CO2 emissions is provided as an example of application.